Helping speed and scale the future of climate and energy solutions

The global energy transition is underway—and corporates, investors, and consumers are sitting on the frontier of the revolution.

Earlier this year in Scottsdale, AZ, J.P. Morgan convened a select group of CEOs and clean-tech pioneers, government officials, and investors to identify strategies to advance the world’s climate and sustainability goals. The forum explored how to clear barriers and capture opportunities to drive decarbonization across the economy.

We believe that a successful energy transition will generate economic growth, preserve energy security and affordability, and help mitigate the worst impacts of climate change. By any measure, the energy transition is a complex subject and there are often a variety of perspectives on how to address the challenges it presents. In Scottsdale, the goal was to move forward with concrete strategies – many of which may help inform clients’ views and investing strategies.

Over the course of two days, three key takeaways emerged:

• The importance of celebrating tangible wins: Demonstrating the positive impacts of decarbonization through job creation, economic growth and the reduction of air pollution, to name a few, can encourage governments and companies to take action and share best practices.
• The significance of policy tailwinds: Moving forward will be easier with the support of constructive government policies boosting clean energy adoption and job growth.
• Scaling climate solutions requires us to think differently about capital: Many climate tech start-ups can struggle to access the financing necessary to scale growth and deploy their strategies commercially, capital providers can work together to help close the funding gap.

Here, we explore those three key themes in more detail.

The view from the podium: The importance of deploying private capital

In his opening remarks, Jamie Dimon, Chairman and CEO of JPMorganChase, emphasized the important role of private capital in enabling and supporting the transition. But achieving a low-carbon economy will require massive, industrial revolution-scale investment across the global economy – estimated at over $5 trillion annually – all while maintaining energy affordability and security.

Dimon also focused on the critical role that strong, clear and consistent government policy plays in driving climate cost curves down. He stressed the importance of reliable government actions, sensible environmental permitting policies, and consistent regulatory behaviors, all of which can help support the successful deployment of private capital. 

Michael Cembalest, Chairman of Market and Investment Strategy for J.P. Morgan Asset and Wealth Management, pointed out that while the future is undoubtedly low-carbon, the pace and pathway remain uncertain. Nonetheless, Cembalest noted the enormous economic opportunities that the transition presents, which includes investment in both climate adaptation and decarbonization efforts.

Takeaway 1: Celebrating tangible wins

While there is enormous work to be done, we have seen meaningful and measurable progress, primarily driven by the rapid deployment of low-carbon technology around the world. As a society, including media, governments and corporations, we can do a better job identifying these successes and describing their impact on local communities: creating jobs, driving economic growth, providing low-cost energy and reducing air pollution.

During the Forum in Scottsdale, we heard from leaders across industries as they shared the best practices and developments they are seeing through their own decarbonization efforts. From companies that are developing sustainable aviation fuel, to creating innovative ways to transport and store alternative sources of energy, to some of the most advanced solar panel technologies, we saw firsthand the value of sharing and celebrating milestones across the global energy transition.

Takeaway 2: The significance of favorable policy tailwinds

Throughout various sessions, presenters underscored the positive impacts of policy tailwinds, such as the implementation of the Inflation Reduction Act (IRA) of 2022, which uses a “carrot” approach by providing tax credits to companies that engage in sustainable business practices.

Importantly, the IRA also incentivizes the adoption of climate-focused strategies by lowering the overall cost for companies to invest in clean energy and become more carbon-efficient. To date, the U.S. utility-scale clean energy industry has announced $473 billion of investment, which has attracted additional private capital, boosted economic growth and created over 40,000 new manufacturing jobs.¹

The IRA aims to produce other positive social outcomes, too. It offers enhanced incentives for business projects that pay prevailing wages, are located in disadvantaged communities, or are situated in communities where local economies depend on traditional energy (like coal). 

Additionally, the U.S. Department of Energy's (DOE) loan program is facilitating capital flow into the energy transition. As of April 2024, the program has logged requests valued at almost $300 billion across 211 applications, demonstrating significant private sector engagement.²

We think that public sector engagement is a powerful signal for investors. When governments enact policies that are met with success, such as targeted subsidies, first loss provisions and loan guarantees, we see a direct correlation with enhanced unit economics. Understanding capital expenditure—and how money is being deployed—is crucial to making good investment decisions.

Takeaway 3: Think differently on capital to scale climate strategies

An important discussion point at the forum was the need to deploy capital in the “missing middle” – the gap in private capital investment that many companies face between early-stage financing (like venture capital) and large-scale infrastructure-like investment. Asset managers that can leverage their size and scale to invest in companies that are well positioned at this critical phase and may have a competitive advantage.

Because of their capital-intensive nature, most mature low-carbon strategies can expect infrastructure-like returns. However, early-stage companies are struggling to mature to that stage because they cannot access growth capital (the so-called missing middle). Traditional approaches to growth equity and infrastructure investment are not effectively solving this problem – creating the potential for opportunity.

Looking across the sectors that are most likely to benefit from these capital infusions, heavy carbon-emitting transport and industrial sectors drew the most attention at the forum. These companies are poised to derive value from the application of new technologies that can significantly reduce carbon emissions.

By allocating capital to the "missing middle," investors have an opportunity to contribute to—and potentially benefit from—the crucial scaling phase of innovation as companies apply new tools to improve their energy efficiency.

Conclusion: Investing for a more sustainable future

We believe economic growth, energy security and sustainability are interconnected – global energy demand needs to be met while renewable energy is scaled. We can and must do both and the world is developing practical, investible clean energy strategies now. Policy has an important role to play in laying the groundwork for that transformation, but scalable private capital will be critical.

J.P. Morgan is at the forefront of these conversations. We’re putting money to work investing in venture and growth capital and supporting our clients in their efforts towards a low-carbon, energy-rich future by providing global reach, expertise, capital and data. If you would like to participate in the development of climate energy strategies to build a more sustainable future, contact your J.P. Morgan team.

¹American Clean Power Association. Investing in America. May 8, 2024.

²Loan Programs Office. April 2024 Monthly Application Activity Report. May 9, 2024.